IEEPA Tariffs Held Unlawful; Section 122 Tariffs Commence; Trade Deals Likely to Falter

The US Supreme Court Decided That IEEPA Does Not Authorize Tariffs

On February 20, 2026, the US Supreme Court affirmed a federal circuit court’s holding that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs. Stated succinctly, the president could not and cannot use IEEPA to impose tariffs.

Impact of Ruling

It’s difficult to overstate the impact of this ruling on the legal, economic, and policy landscapes. The Supreme Court foreclosed the president from using IEEPA to impose tariffs, which creates enormous refund liability to importers and significantly alters revenue projections. Most importantly, the ruling shifts trade policymaking leverage back toward Congress and established trade statutes. This foreclosed the president from using emergency tariffs as a negotiating tool.

The ruling invalidates all tariffs imposed under IEEPA. No tariffs that used IEEPA as a statutory basis may be collected as of February 20, 2026. The foregoing applies to both reciprocal and nonreciprocal tariffs, i.e., those levied on China, Canada, and Mexico in relation to fentanyl smuggling; on Brazil in relation to the former president of Brazil; and on India for Russian oil imports.  

The revenue collected pursuant to IEEPA exceeds $175 billion. More than 50 percent of all US duties collected—a staggering monthly sum exceeding $20 billion—have been confirmed unlawful. The specific executive orders that identified IEEPA are as follows:

The applicable Harmonized Tariff Schedule (HTS) codes are, inter alia, as follows:

New Tariffs and Impact on Importers

Effective as of 12:01 a.m. ET February 24, 2026, a 15 percent global tariff will be imposed pursuant to Section 122 of the Trade Act of 1974. This statute allows the president to impose short-term, country-specific tariffs of up to 15 percent for 150 days without congressional approval to address “large and serious” balance-of-payments deficits, import quotas, or a combination of both.

It is odd that the president chose to move forward with Section 122 given that the DOJ in this very case told the Supreme Court that Section 122 does not: “have any obvious application here, where the concerns the President identified in declaring an emergency arise from trade deficits, which are conceptually distinct from balance-of-payments deficits.” It appears to be an overture to more litigation.

There are several other key points related to Section 122 tariffs:

• They are valid for a maximum of 150 days unless Congress acts to extend them. Without congressional action, the president could potentially declare a new emergency to restart the 150-day period. Were the administration to attempt this perpetual emergency tariff cycle, it will undoubtedly be the subject of federal litigation, since it would place enormous burdens on US importers.
• Section 232 tariffs preempt Section 122 tariffs on the same goods. This means that there can be no “stacking” of the two tariffs on the same goods.
• Goods entering pursuant to the United States-Mexico-Canada Agreement should not be impacted by Section 122 tariffs.

The following tariffs remain in effect from both the first and second Trump administrations:

Refunds

The Supreme Court decision did not offer direction as to refunds; however, the Trump administration has already ordered US Customs and Border Protection (CBP) to cease collection of IEEPA-related tariffs. We expect CBP to issue guidance on refunds via its Cargo System Messaging Service and to update the HTS to remove all IEEPA-related provisions.

As per our prior alert, importers should keep diligent records of all IEEPA entries and corresponding duty payments. The specific liquidation dates of those entries will be determinative as to the speed and efficiency of the related refunds. Importers should contact their counsel as soon as practicable to plan the immediate next steps.

Man With a Hammer; What Happens Now to Global Trade Deals

A cognitive bias is an unconscious and systematic error in thinking distorting perception of reality and resulting in inaccurate information interpretation. One such cognitive bias involves an overreliance on a familiar tool. The great American psychologist Abraham Maslow wrote in 1966, “It is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”

Following the decision, it will be important to monitor the global trade deals the president has claimed to have struck worldwide. Without the IEEPA tariff threat, most of these deals may falter. The implicit danger in announcing trade deals while simultaneously providing no trade agreement framework was that they could be rescinded easily.

The additional concern is that some trade agreements (Switzerland, Luxembourg, India, etc.) include a tariff floor that was implemented as a modification to the IEEPA reciprocal tariffs, using HTSUS headings 9903.02.82 and 9903.02.83. Those headings sit within the IEEPA tariff subchapter. Once the IEEPA tariffs are rescinded, there is no legal instrument giving effect to the floor.